Stockwatch: EMC and BMC do well, but some warn 2003 will not be any easier
Stockwatch: EMC and BMC do well, but some warn 2003 will not be any easier
The year has barely begun and already the chants of doom are becoming louder. The technology sector was hoping 2003 would be respite after 2002 and the record lows seen in October, but Fred Hickey, the editor of technology investment newsletter The High-Tech Strategist has warned the market not to get its expectations up. Despite this, EMC and BMC had healthy reports and have been given a positive outlook for the year.
"I think Nasdaq will be hit the hardest, but they are all going lower. The long and dreary winter for tech stock investors is likely to become even colder."
In an interview with Reuters news agency, Mr Hickey cited the spate of recent negative news from the technology and storage sector as an indicator. According to Mr Hickey, technology spending is not accelerating, it is getting worse.
Amongst the negative reports to surface since New Year's Eve, IBM and Microsoft have said vaguely that there is not much "visibility" for the near future. Sun Microsystems will not give a prediction of the financial outlook for the first quarter of the year and the chip makers Intel and rival AMD have both said that they will be lowering their capital spending for the year.
"I think Nasdaq will be hit the hardest, but they are all going lower," Mr Hickey said. "The long and dreary winter for tech stock investors is likely to become even colder."
Counter acting the gloom from Mr Hickey was EMC, which is predicted to see strong stock market action in 2003. Analysts have said that new products and initiatives from EMC throughout 2003 will ensure that the storage vendor remains a competitive player. The analysts were pouring over EMC's fourth quarter earnings for 2002, which were better than expected and due to a lower cost structure and an increase in market share.
For the fourth quarter EMC reported a net loss of US$64 million, which is 3 cents a share, but income was a healthy $53 million, which matched analyst's predictions. Revenue was higher than estimated at $1.49 billion. These figures were achieved at the cost of people's jobs, as EMC shed jobs in order to get its costs inline with revenues.
But EMC remains confident and said it will be aiming for first quarter earnings of 1 cent a share on revenue of $1.35 billion to $1.4 billion. Several senior analysts in the United States, including Brent Bracelin of Pacific Crest Securities backed EMC's claims and were confident that the company will continue to surprise as it did in the fourth quarter of 2002.
Also figuring in the good news is BMC Software. The Houston company has had some difficult times of late, but has announced that cost reductions and an acquisition last year have created a third fiscal quarter profit, due to revenue increasing for the first time in three years.
This announcement caused BMC shares to rise by 11 per cent; exceeding analysts expectations as stocks rose by $1.23 to $18.59. BMC's net income was $12.1 million for the December quarter and the company earned $34.6 million.
BMC spent most of 2002 restructuring and made 1000 redundancies. Its research and development costs were also reduced by 12 per cent and revenue increased by nine per cent to $349.6 million. BMC acquired Remedy Corp in November, which was part of the bankrupt Peregrine Systems group.
BMC also saw licence revenue rise by 11 per cent to $168.5 million, this was said to be due to the addition of Remedy and BMC's popular Patrol product. Commenting on BMC's results, analysts said that BMC was benefiting from a stabilisation in the mainframe software market.
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